INTERNATIONAL. Gold may climb and copper is the most-favored base metal for 2012, according to Morgan Stanley, which said that investment demand will bolster bullion, while a deficit will benefit the raw material used in pipes and wires.

Gold will average US$1,845 an ounce, Melbourne-based analysts Peter Richardson and Joel Crane said in a report today. While that’s 16% below their earlier forecast, it compares with today’s spot price of US$1,652.20 an ounce at 1:50 p.m. in London.

Copper may average US$3.70 per pound (US$8,157 per metric ton), 3% less than an earlier prediction. Morgan Stanley is bearish on lead, nickel, aluminum and zinc amid surpluses.

Morgan Stanley’s outlook compares with that from Goldman Sachs Group Inc., which is bullish on aluminum and zinc as well as copper and gold. Global industrial output may grow 4.78% this year, down from 5.3 percent in 2011, with manufacturing is set to shrink in Germany, France and Italy amid the debt crisis, Morgan Stanley said.

“Commodity markets continue to confront the twin macro risks of a European recession and a hard landing in China in 2012,” the analysts said. “A continuing recovery in the value of the U.S. dollar is proving to be an additional headwind.”

Gold’s gains would continue to driven by rising investment demand, central-bank purchases and less hedging by producers, they wrote. The revised forecast represents a 17% climb from last year’s average of US$1,572.28 an ounce. Bullion, which has rallied for 11 years, may also benefit from constrained growth in mine supply, they wrote.

Copper may be supported by restocking in China, the world’s largest user, Morgan Stanley said. There would be a refined- metal deficit of 300,000 tons this year, the third straight annual shortfall, the analysts forecast. Three-month copper rose to $8,225 per ton today, the highest level since Oct. 28.

China’s economy expanded 8.9 percent in the fourth quarter from a year earlier, the slowest pace in 10 quarters, as export demand moderated, according to data released today. A so-called hard landing in China, defined by the bank as two successive quarters of expansion of less than 7 percent, “still seems a low probability,” the Morgan Stanley analysts wrote.

“We are most bullish on copper, moderately bullish on aluminum and zinc, and bearish on nickel” over six to 12 months,” Goldman Sachs said in a report yesterday.

While the bank’s 12-month estimate for copper was cut 5.3% to US$9,000, “current prices generally present value to consumers,” according to Max Layton, a London-based analyst.

The Dollar Index, a measure against the currencies of six trading partners, has gained 1.1% this month, extending last year’s 1.5% rise. The currency has gained as the sovereign-debt crisis in the euro zone has intensified.

Standard & Poor’s yesterday removed the AAA rating of the European Financial Stability Facility, which is designed to fund rescue packages for Greece, Ireland and Portugal, after reducing the top grades of France and Austria by one level on January 13. The company also downgraded Italy, Portugal and Spain.

Morgan Stanley said it’s bearish on nickel, aluminum, lead and zinc, where there may be “sizeable surpluses.” The average forecast for nickel for 2012 was cut 10 percent to US$9 per pound (US$19,842 per ton), the biggest reduction among base metals, according to the report. Nickel futures traded at US$19,598.

The Chinese economy will grow 8.4% this year, Morgan Stanley said, after revising the number from 8.7%. Growth last year was 9.2%, down from 10.4% in 2010, today’s data showed. Consumer price inflation cooled to 4.1% in December, the slowest pace in 15 months.

“Importantly, an anticipated easing in CPI inflation to 3.4% in 2012 is providing increased scope for selective and targeted policy easing, with the likely outcome of lower but sustainable growth,” Morgan Stanley said.

MIDDLE EAST BUSINESS COMMENT & ANALYSIS

INTERNATIONAL. Washington is moving away from the strategy it has followed since the early 2000s - of being the prime military force in regional conflicts - and is shifting the primary burden of fighting to regional powers while playing a secondary role.

INTERNATIONAL. Washington is moving away from the strategy it has followed since the early 2000s - of being the prime military force in regional conflicts - and is shifting the primary burden of fighting to regional powers while playing a secondary role.